1. 2014 FARM BILL COMMODITY/CROP INSURANCE PROGRAMS: WHEAT AND GRAIN SORGHUM Dr. Jody Campiche Department of Agricultural Economics Oklahoma State University

2. Disclaimer  This information is based on my understanding of the 2014 farm bill  Some details may be slightly different once the final rules and regulations are released  This information is intended to be for educational purposes only

3. Commodity/Crop Insurance Programs CROP INSURANCE COMMODITY PROGRAMS

4. Commodity Program/Crop Insurance Choices  PLC  PLC + SCO  ARC-County  ARC-Individual  RP, RP-HPE, YP Changes?

5.  ARC/PLC paid on 85% of base acres  SCO paid on 100% of planted acres  No premium for ARC/PLC  Premium for SCO  Payment limits for ARC/PLC  No payment limits for SCO  ARC limited to 10% of benchmark revenue  SCO/PLC payments can be higher than ARC Important Points

6.  SCO not available for all crops for 2015  Some producers have base but are not planting a crop  Some producers have a higher level of coverage on their individual policy so SCO is less attractive  Some producers plant more than their base so SCO may be more attractive Important Points

7. PLC Reference Prices FAPRI/WASDE Price Projections CropPLC Reference Price Grain Sorghum3.95 Wheat5.50 August 2014 Price Projections - Wheat 2014/152015/162016/172017/182018/19 FAPRI$6.27$5.73$5.72$5.79$5.87 USDA WASDE$5.80-$6.80 August 2014 Price Projections - Sorghum 2014/152015/162016/172017/182018/19 FAPRI$3.63$3.90$3.93$3.96$4.02 USDA WASDE$3.30-$4.00

8. Sorghum PLC Payments assuming FAPRI/WASDE Price Projections PLC Projected Payments – Sorghum (FSA payment yield = 45) 2014/152015/162016/172017/182018/19 PLC$14.40$2.25$0.90$0 PLC-85% of base adj. $12.24$1.91$0.77$0 August 2014 Price Projections - Sorghum 2014/152015/162016/172017/182018/19 FAPRI$3.63$3.90$3.93$3.96$4.02 USDA WASDE$3.30-$4.00

9. Wheat PLC Payments assuming FAPRI/WASDE Price Projections August 2014 Price Projections - Wheat 2014/152015/162016/172017/182018/19 FAPRI$6.27$5.73$5.72$5.79$5.87 USDA WASDE$5.80-$6.80 PLC Projected Payments – Wheat (FSA payment yield = 40) 2014/152015/162016/172017/182018/19 PLC$0 PLC-85% of base adj. $0

10. ARC Benchmark Prices Wheat Year MYA Price ARC Price Oly Avg 20094.875.50 20105.70 20117.24 20127.77 20136.87 20146.27 6.60 20155.73 6.79 20165.72 6.79 20175.79 6.29 20185.87 5.93 Sorghum Year MYA Price ARC Price Oly Avg 20093.223.95 20105.02 20115.99 20126.33 20134.25 20143.633.955.09 20153.903.955.09 20163.933.954.73 20173.96 4.05 20184.02 3.95 *If MYA price < reference price, replace with reference price *Wheat reference price = $5.50, Sorghum reference price =$3.95

11. Wheat

12. Which Program to Choose?  Wheat  ARC may trigger for wheat in many counties in the Southern Plains for 2014/15 if the county has a yield loss Payments will not be large (likely < $20/acre)  PLC will likely not trigger in 2014/15 for wheat  Producers who are concerned about price declines over the life of the farm bill and a stronger overall safety net may want to elect PLC (and add SCO) SCO is not available for the 2014/15 crop year

13. SCO Decision Tool – 70% RP FAPRI Projected Prices for Wheat

14. SCO Decision Tool – 75% RP FAPRI Projected Prices for Wheat

15. SCO Decision Tool – 80% RP FAPRI Projected Prices for Wheat

16. SCO Decision Tool – 70% RP 2015 Wheat Price = $5.00

17. ARC vs. PLC 2014/15 Wheat  Art Barnaby’s Spreadsheet

18. Sorghum

19. Which Program to Choose?  Sorghum  ARC may trigger in some counties in the Southern Plains for 2014/15 Maximum payments could range from $22-$35/acre (depending ARC county yields)  PLC may trigger in 2014/15 for sorghum if the price < $3.95  Producers who are concerned about price declines over the life of the farm bill and a stronger overall safety net may want to elect PLC (and add SCO)  SCO is not available for the 2014 crop year

20. SCO Decision Tool – 70% RP FAPRI Projected Prices for Sorghum

21. SCO Decision Tool – 70% RP 2015/16 Sorghum Price = $3.22

22. ARC vs. PLC 2014/15 Sorghum  Art Barnaby’s Spreadsheet

23. ARC vs. PLC 2014/15 Sorghum  Art Barnaby’s Spreadsheet

24. OSU Farm Policy Website Simple SCO/ARC/PLC decision tool for winter wheat OSU/KSU Decision Tool – available soon Joint effort: Jody Campiche & Eric DeVuyst – OSU Art Barnaby & Mykel Taylor – KSU Partially funded by SRMEC Other videos, newsletters, etc… www.agecon.okstate.edu/agpolicy/farm_2014.asp

26. Questions? Jody Campiche jody.campiche@okstate.edu http://agecon.okstate.edu/agpolicy/ 405-744-9811